risk level?

Hi i have an account ($500) and i have been trading with a freind who gives me signals to help me out etc (as i am just building my own knowledge from this forum and working out my stratagies etc)

after reading many posts about risk and money managment i think i am risking to much of my account per trade...

like i said it is a $500 account (now at $450) i have been setting my risk as follows:

risk level : x100

amount :$50

stop loss: $50

can anybody tell me if those figures are correct for an account my size (obviously i understand the stop loss can go up or down depending on the type of trade/news release), or if i should be doing something different?

Hi,
yes I think your risking far to much, on every trade your risking 10% of your capital, it needs to be more like 1-2%.

With very little capital you need to really protect it as much as possible if you want to stay in the market beyond a couple of weeks. Now you have $450 so 1% is $4.50, at that level you need to be trading microlots which makes a pip worth 10 cents, it will also allow you to be more flexible in your trading decisions.

Ok it's very important to know what type of account you have, ring your broker and ask. The different account types change the value of a pip or point, which is the smallest value change in a currency pair.

Pharaohs article is very good, here I'll give you a quick overview.

In a standard account buying or selling 1 lot, every pip is worth $10. You can break that 1 lot down into 10 smaller minilots where 1 minilot will give a pip value of $1.

A micro account, which you would have to open up independently, breaks that 1 minilot down even further into 10 micro lots where 1 pip is worth 10cents.

So taking your situation as an example. You have $450 and you open a micro account. If you want to risk no more than say 2% of your capital in any one trade you have the following options: (you will have to include the spread from your broker)

That’s the trouble with Demo account that gives us Newbies USD100k to “play” with.

Click to expand...

Yes exactly Rahman, it is fantasy money and far from the reality of many retail forex traders, but the first time a novice trader places a lucky 5 lot trade thinking this is normal and it goes 100pips..... it's HOLY COW! I just paid the mortgage and all my bills in 1 hour of work!!! ..... this babys for me! (I've got the t-shirt too, in fact I think I might try selling them)

Never has there been an enterprise where beginner's luck was more corrosive to a person's long-term success than in Forex. The fact that demo accounts may trade more profitably than real money accounts only adds to the "holy cow" effect.

Heck, the first few weeks I tried demo Forex trading, I thought I was a freakin' genius at trading. I had the Midas touch, it seemed.

im unsure of which one i should be going for with a an account my size? dont i have 1 microlot account anyway (eg. i just have one trading account and my broker said it is a microlot) based on that fact are you saying that when i enter a trade i can set my stop loss at -90 pips (as a maximum amount)

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